Home » Posts tagged 'UK budget'

Tag Archives: UK budget


Join 19,000 other followers

3 out of 4 Isn’t Bad Theresa May – But Your Brexit Deal Isn’t Worth Signing

by John Brian Shannon

Last week Theresa May returned from the continent with a 585-page Brexit proposal in hand that she says is worth signing so that Brexit negotiations can move forward to the ‘Future Relationship’ phase where the UK and the EU scope out what each side wants from the other over the next 50-years.

But is that appropriate when she’s attained only three of the four goals that 17.4 million Leave voters voted for in the EU referendum?

It seems Theresa May has done her best. Of that, there is no doubt.

Certainly, she has travelled many thousands of miles, endured being summoned to Brussels at 5:00 in the morning to discuss Brexit with her EU counterparts, has suffered through countless knock ’em down drag ’em out marathon negotiating sessions, been castigated in the world media and has faced down a fractious Conservative Party that should’ve had her back throughout the entire process.

And all of that added to the knocks that she receives in relation to the rest of her job — the non-Brexit-related portion of her Prime Ministerial duties. Being a British Prime Minister is tough at the best of times. More people want you to fail than to succeed. I can’t imagine why anyone would offer themselves up as an ongoing human sacrifice like that.

In short: adding Brexit to her brief, meant adding to Theresa May’s grief!

As unfair as it sounds, Theresa May, for all her good and admirable intentions has failed to deliver the Brexit deal that 17.4 million Britons voted for and in good conscience empowered the Prime Minister to accomplish.

Now Theresa May wants to skip past one of the four pillars of a successful Brexit and begin negotiating the future relationship with the EU. And that’s a non-starter.

As terrible as it sounds, Theresa May has failed to deliver what she promised to voters, to UK business, and to her party. So, does that mean she should resign? Does it mean her party should fire her and put someone else in 10 Downing St? Does it mean the acting Queen of the United Kingdom should ask for Theresa May’s resignation?

In a word, yes. (All three) But, first, let’s try to make Theresa May understand that she promised to deliver a fair and balanced Brexit agreement — one that included the four pillars of Brexit success — and that she still has work to do in order to be allowed by her party to proceed onto the next phase of the Brexit negotiations.

She’s been (mostly) fair with us and the British public has been (mostly) fair with her. The same applies to Conservative MP’s, to non-Conservative MP’s, the media, UK business, and in relation to other stakeholders in Britain’s future; She has been (mostly) fair with them and they’ve been (mostly) fair with her.

So, let’s continue to be fair to Ms. May and give her the information she needs to realize that 3-out-of-4 isn’t good enough and also give her our full support to empower her to bring home all four pillars of Brexit success — before allowing her to proceed any further with the Brexit negotiations.

If she can’t bring home a worthwhile Brexit agreement that will pass in the House of Commons, then the UK needs a new Prime Minister.

But before we take that drastic step, let’s pull out all the stops to give Theresa May every possible opportunity and all the support she needs in order to succeed in obtaining a worthy Brexit deal. She’s earned that respect from us.

The Four Pillars of the Leave Campaign

The four markers of success for Brexit were the reason that 17.4 million Britons voted to Leave the European Union. And only on the basis that Theresa May said she could attain those four goals was she hired-on as UK Prime Minister.

Hitting 3-out-of-4 of those goals wasn’t discussed.

If she had at the time of her hiring, mentioned that she could attain only 3-out-of-4 of those goals she wouldn’t have been hired to be the UK Prime Minister and someone else would’ve gotten the job. But we believed her, and therefore, she got the job.

The Four Pillars:

  1. Take back control of the UK’s borders and immigration
  2. Take back control of the UK legal system
  3. Take back control of the UK economy
  4. Take back control of UK trade

And Theresa May’s Brexit deal delivers only three of those points.

As the Prime Minister has said in recent days, her agreement will allow the UK to take back control over its borders and immigration policy, it will allow the country to take back control over its court system, and it will allow the UK to take back control over its economy.

But the deal she has handed in won’t allow the UK to negotiate free trade deals with other countries — and very much worse than that — there’s no end date for that portion of the agreement.

Theoretically and probably practically as well, the EU could keep the UK in a state of suspended animation — with the UK unable to write its own trade agreements — forever. And forever is a long time. Trust me on this.

Theresa May Has a Promise to Keep or She Must Step Aside

As horrible as it sounds, Theresa May has only kept 3-out-of-4 promises in regards to her most recent Brexit pronouncements, and if she can’t keep her fourth promise, she needs to step aside and let a new Prime Minister tackle the thing that couldn’t be done.

But first she should read a great poem by the poet Albert A. Guest:

It Couldn’t be Done

Somebody said that it couldn’t be done
But he with a chuckle replied
That “maybe it couldn’t,” but he would be one
Who wouldn’t say so till he’d tried.
So he buckled right in with the trace of a grin
On his face. If he worried he hid it.
He started to sing as he tackled the thing
That couldn’t be done, and he did it!

Somebody scoffed: “Oh, you’ll never do that;
At least no one ever has done it;”
But he took off his coat and he took off his hat
And the first thing we knew he’d begun it.
With a lift of his chin and a bit of a grin,
Without any doubting or quiddit,
He started to sing as he tackled the thing
That couldn’t be done, and he did it.

There are thousands to tell you it cannot be done,
There are thousands to prophesy failure,
There are thousands to point out to you one by one,
The dangers that wait to assail you.
But just buckle in with a bit of a grin,
Just take off your coat and go to it;
Just start in to sing as you tackle the thing
That “cannot be done,” and you’ll do it.

As far as the rest of her premiership, Theresa May has done a fine job and until last week when she crashed a bit or ran out of steam, she was getting stronger and more focused every week since taking the job in July 2016, and therefore, should be accorded every respect should she choose to step down.

Few people have worked harder or endured such media spectacle and political grief and in British politics that’s saying something. All of that said however, the future of the country is more important than one Prime Minister no matter how admirably she has tried.

So, let us know your decision, Theresa. We stand by to help you reach a perfect 4-out-of-4 score — which is the only score the UK can contemplate in this case. And if you feel you can’t deliver what you’ve many times promised we wish you well in your future endeavours!

Austerity Has Changed How the World Views the UK

by John Brian Shannon

Why, for the love of God, don’t governments utilize the most obvious solutions to solve their budgetary challenges whenever a global financial crisis hits, instead of defaulting to budget cuts that can appear either inept or mean-spirited?

Finance Ministers don’t set out to craft inept or mean-spirited policies during times of economic crisis, but that’s how it plays out in the media and in living rooms across the country or wherever people gather to discuss the economy.

In the UK, this manifests itself in the names that people call their political parties.

If government austerity cuts don’t affect you, you continue to call the Conservative Party by its rightful name. But if austerity hits you hard, then you’re one of those who’ve taken to calling the Conservatives ‘The Nasty Party’ — and they’ll never get your vote ever again, etc., etc. (Yes, I do empathize, BTW. But that’s not what this blog post is about)

It just depends upon which side austerity hits you.

And budget cuts (at least budget cuts perceived as unfair by a significant percentage of the population) almost always result in either a lost election or loss of parliamentary majority at the next election. Check out those stats! (You’ll see how true that statement is)

Theresa May’s ‘hung Parliament’ election result in June 2017 is 100% attributable to the UK austerity budgets that have been in effect since 2010, and hers is just one example out of many majority governments around the world that have suffered as a result of their austerity policies.

There IS a Better Way!

Due to market conditions, about every 25-years a recession comes along in the capitalist countries. You can almost set your clock by it. It’s the ‘nature of the beast — carry on’ is how recessions are described by economists, and nobody tries to prevent recessions, as such ‘resets’ help to prevent even worse economic crashes in the future.

Still, there’s a way for countries to survive economic downturns WITHOUT shooting themselves in the foot every day of the recession. (A novel idea!)

The public knows an economic downturn when they see it. In fact, they have enough experience in their own lives balancing family finances when times are good, let alone when domestic financial challenges appear such as a job loss or (suddenly) another mouth to feed. Therefore, they know the government must compensate whenever the country faces a financial challenge.

The question for governments is how to do it and not lose the next election. Or the one after that.

And the answer is; To do it fairly.

That is; Apply cuts that will be perceived as ‘fair’ by a majority of the public  — instead of deep cuts to some departments while other departments see no cuts at all, or worse, are able to increase their spending.

Does it seem fair to you while in recession that Health or Education should receive deep cuts, while spending on the military or the environment is unaffected? (I’m just using hypotheticals here for an example. Every Briton knows their military is chronically underfunded and few begrudge the UK military being exempted from budget cuts)

Back to the subject at hand; Every department in practically any organization on the planet has 5% ‘fat’ built-in to it. It’s just the way of organizations.

Budgets tend to be tightly managed in the first few years, then, over time, surpluses accrue or unused properties aren’t sold off as quickly as they could be, or in other ways there’s potential for either budget savings or revenue increases. Or, depending on the department, perhaps a combination of selling off unused assets and departmental savings could meet the new budget targets set by the government.

If you’re a large organization like the UK government and you expect your revenue to fall by 7% (for example) here’s the way to do it fairly!

Simply inform your departments of the 7% budget exigency, and instead of arranging deep cuts for some departments and zero cuts to others which sets the seeds for future electoral defeat, inform all departments to cut their budget by 7% — or alternatively — tell them to find ways to increase their revenue by the shortfall amount.

Let me be clear, if former Chancellor of the Exchequer George Osborne had simply told every government department in 2010, “We’re facing a 7% (or whatever percentage) cut in revenue, therefore, each government department must cut 7% from their annual budget until further notice,” each department would’ve done exactly that and hardly anyone would’ve noticed. (Remember, every organization/department already has 5% ‘fat’ in their system, so only a 2% budget challenge remains in this hypothetical example. At that point, accounting for the final 2% equates to selling off surplus real estate assets until that amount is obtained)

On the other hand, some departments might be real estate ‘heavy’ and could counter their entire 7% budget challenge by simply unloading their surplus real estate, thereby meeting the government’s directives to cut costs by 7% or increase revenues by 7% (or any combination thereof) to hit their departmental budget targets.

Wouldn’t that have been much better than the pain inflicted on the bottom-two economic quintile people in Britain (and which cost Theresa May a parliamentary majority) all of which has conspired to cheapen the ‘British brand’ around the world?

Read here, in the New York Times just how ‘fairly’ or ‘unfairly’ (depending on your worldview) the United Kingdom’s austerity plan has been portrayed around the world.

A country’s fortunes (fairly or unfairly) can rise or fall based on the perceptions of large numbers of people. Let’s hope that future UK budget cuts will not only be fair, but be seen to be fair by large numbers of Britons and by people around the world.

Choosing Triumph or Tragedy for Britain’s Economy

by John Brian Shannon | November 21, 2016

In this new century every country has its challenges. And these days, even advanced nations like Britain are challenged to balance the books while still providing the services that citizens depend on, and international partners expect.

No Worries. It’s easy as pie!

But we’ll get to the pie charts later. For now, let’s sketch out some broad outlines that a vast majority of people probably agree on.

And number one on the list must be that rich countries shouldn’t be running budget deficits. Ever. With the possible exception of major national emergencies or God-forbid, another World War. Other than those caveats, there is simply no excuse good enough that G7 nations should be running budget deficits. Full stop.

Ours is the most advanced civilization the world has ever known, we are literally swamped in knowledge and technology, and our ability to communicate and trade with other nations is almost limitless.

Why then, do developed nations have budget deficits that have piled-up over the decades to the extent that some nations have debt levels approaching 260% of GDP? (NOTE: Government debt is merely the total of their accumulated deficits)

It’s a very good question and the answer is; WWI, WWII, the Cold War, assorted other wars like Vietnam, the 1990 Gulf War, the Iraq War and the Afghanistan War — all of these required massive spending on a buy-now/pay-later basis.

For one example of how costly this is, the total interest payments just to service U.S. government debt since deficit spending began, equals $2.5 trillion dollars.

Here are the highlights from the U.S. Debt Clock (courtesy of the U.S. Treasury)

  • U.S. total national debt — $19.8 trillion
  • U.S. debt per citizen — $61,131
  • U.S. debt per taxpayer — $166,240
  • U.S. budget deficit — $590 billion (when calculated using GAAP rules, this number totals $5.6 trillion)

America alone spent one trillion dollars on the Iraq War.

For one trillion dollars (from the year 2000 through the year 2050) every unemployed American citizen could have been given a job paying them $50,000/year for their entire working life, and each kid who couldn’t afford to pay their university tuition themselves could have gotten one baccalaureate degree paid for by the U.S. government, and each U.S. citizen living on welfare could have been paid $25,000/yr to keep the mailboxes on their street clean and painted, and the sidewalk swept. With quite a few billion dollars left over by the time 2050 rolled around.

Instead, all of the money spent on war by the United States was borrowed money that will never be paid off — and American citizens will be paying the interest indefinitely. Forever is a long time.

See this snapshot on U.S. government debt. Scared yet?

For comparison purposes, the population of the United Kingdom is almost exactly one-fifth of the United States. Below is a snapshot of Britain’s deficit and debt picture.

  • Britain’s total national debt — £1.7 trillion
  • Britain’s debt per citizen — £28,589
  • Britain’s debt per taxpayer — £49,174
  • Britain’s budget deficit — £19.1 billion
Britain - Government expenditures for Fiscal Year 2017

Britain – Government expenditures for Fiscal Year 2017

At the moment, the UK government is doing three things well to help Britain’s economy

The brightest spot for Britain’s economy is the already-passed legislation requiring that all central government budgets be balanced from 2020-onward.

Another hopeful sign is that Philip Hammond, Chancellor of the Exchequer, has devoted £1.3 billion to a road building plan in his recent Autumn Statement, thereby allowing thousands of workers to continue working, and adding hundreds of presently unemployed workers to the workforce.

In the creative accounting department, workers can now save some money and their employers can save even more — while both avoid some amount of National Insurance cost compared to the existing calculation method, via the so-called ‘Salary Sacrifice’ method.

Britain - Chancellor Philip Hammond does a little bit of magical accounting (the good kind) to make British tax law more efficient.

Britain – Chancellor of the Exchequer Philip Hammond does a bit of magical accounting (the good kind) to make British tax law more efficient. Click on the image to read the Daily Mail article.

While these seem to be small (but brilliant) improvements to the UK economy, it’s important to remember that the Theresa May government is less than 130 days old. And although these are baby steps, they are positive and add certainty to Britain’s economic outlook.

More fiscal and monetary levers need to be applied than that however. And importantly, countercyclical policy must be employed as a long-term economic lever throughout the British economy, with special emphasis on creating employment during economic downturns.

What else could be done to help Britain’s economy?

Quite a lot.

Every government in the world needs money to operate, and the taxes gained from personal income tax are already too high (just ask any taxpayer) while higher corporate taxes are detrimental to attracting business to your country.

Four quick ways to supercharge Britain’s economy

a) Match Canada’s lowest-among-the-G7 corporate tax rate
b) A 5% tariff on every imported good
c) Massive infrastructure spending programme equal to annual import tariff revenue
d) Legislation permitting up to 5% of electrical demand in each UK county be met with clean coal

Still bound by EU trade laws over the next (approx) 36 months, how can Britain excel economically?

a) One of the reasons that Canada virtually breezed-through the financial crisis of 2009-2012 is that it had the lowest corporate tax rate in the developed world, it ranks well for ease of doing business, and it has a streamlined process for existing businesses to relocate to Canada allowing corporations to easily move to a lower corporate tax rate — all of which worked to keep Canada on an even keel throughout the global financial crisis. (Not world-changing, but ‘just enough’ to get the job done for Canada)

In retrospect, during the boom times, a low Canadian corporate tax rate represented a slight loss in revenue for Canada, but during the recession the low corporate tax rate promoted many relocations to Canada — when they weren’t prevented by President Obama, that is.

In the case of the Burger King fast food chain, it decided to relocate to Canada in order to save billions in corporate taxes, however, the U.S. President decided to block the move. Although I’m still a fan of President Obama, it teaches us that there are very real limits to the benefits of low corporate taxes, due to market interference by politicians that say they believe in free markets, but don’t. And there are many of those.

Still, a low corporate tax rate that matches the Canadian rate would attract new business to Britain. There will be times that such moves are overruled by faux free trade governments, but on the main, Britain would gain more than it would lose by matching Canada’s corporate tax rate.

Yes, the UK government would lose some amount of corporate tax revenue in the short-term. However, that is balanced-off by the hundreds of new businesses that would relocate to Britain over the long-term — possibly even from Canada which can’t compete with the astronomical level of economic activity in London, nor a prestigious London address.

Inclusive in the term free enterprise with free markets, means that corporations are free to set their headquarters anywhere they want.

Where to recapture that corporate tax revenue loss and add billions more revenue?

b) The most efficient way for Britain to recover that short-term revenue loss and to gain billions more revenue, is by instituting a 5% tariff on every good that arrives in the country.

If Britain and her trade partners agree to the same 5% tariff and a standardized list of exemptions in their own countries, there will be nothing to fight over.

On a personal note, because I happen to believe that knowledge is the solution to all problems, I have a problem with taxes on books, whether they are books printed on paper, recorded on DVD’s, or are purchased as E-books.

Similar applies to those medicines that save lives. Such things should be exempted from all forms of taxation, including tariffs. Everywhere on the planet.

By instituting a nominal tariff of 5% Britain would also make imported products minimally more expensive, while Made in Britain products would become more cost-competitive. British manufacturing (jobs) would see an uptick and sales (profits) would increase.

NOTE: Not to make this too complicated here, but many of Britain’s exports are high-end items. If there happens to be a 5% tariff placed on British goods in other countries, don’t expect it to stop foreign buyers from purchasing an Aston Martin, for example.

At the other end of the market, low-end items such as imported T-shirts which typically sell for £1.40 will not be much affected by a 5% tariff. However, it would be reasonable to expect an uptick in the sales of UK manufactured T-shirts. (In a perfectly efficient UK T-shirt market, a 5% sales increase in UK manufactured T-shirts could be expected once the foreign manufactured T-shirt inventory is sold off)

Obviously, both the pricey and the least pricey items wouldn’t be much affected by a 5% tariff (for very different reasons) but foreign manufactured items in the middle price ranges will be the items affected, and the market would see a corresponding rise in the sales of UK manufactured items. Things like computer monitors, home exercise equipment, and food processors, for example.

A 5% tariff would raise uncountable billions of pounds sterling for the British government — exactly in the time of deficit elimination, and as unprecedented immigration levels have increased unemployment among blue-collar workers in Britain, and as Brexit roils the markets, and as a potentially protectionist U.S. administration is crowned.

In short, there is every reason for Chancellor of the Exchequer, Philip Hammond, to create a minimal and standardized tariff structure (that all of Britain’s trade partners could buy-into) means that it could be passed immediately if EU parties agree thereto. Otherwise, it can’t begin to take effect until the day after Brexit occurs.

Even so, there’s no reason that the legislation couldn’t be researched and written now, ready for Day One of post-Brexit Britain.

I can’t emphasize it enough. The Chancellor of the Exchequer and the Prime Minister must SELL their trade partners on this tariff, proving that it will be a net benefit to all of Britain’s trade partners. (If a mild tariff can do all that for Britain’s economy, it can do the same for EU nation economies)

In the absence of convincing EU trade partners of the wisdom of this plan, three years of tariff revenue will be lost — revenue that could have been used to dramatic effect in the UK economy.

c) While Philip Hammond’s £1.3 billion road building plan is a good one, it needs to be upgraded to a £130 billion national infrastructure plan.

So much of Britain’s infrastructure — from roads and bridges, to trains and trams, to airports and seaports, and to significant other structures and buildings — need replacement, repair, or major upgrades.

It could even save money over the long-term. In the case of many of Britain’s old government buildings, due to their obscene electricity consumption and inefficient insulation, some old buildings cost millions of pounds per month to light and heat.

Building new, Zero Net Buildings, means that they produce as much energy as they consume over the course of the year, saving millions of pounds sterling annually.

Retrofitting older structures isn’t quite as efficient, yet can still save millions of pounds annually.

Millions of British jobs would be created over 10-years and all of it paid for by a tariff on imported goods.

(Yes China, the U.S., and other UK trade partners, please export more stuff to Britain, as we need the tariff revenue!)

The tariff could easily provide enough funding to accomplish all of this and more, once Britain is running balanced budgets.

d) Legislation that permits up to 5% of electricity demand *in each UK county* be met with clean coal, means return to employment for thousands of coal miners, it means the construction of hundreds of small, clean-coal power stations, and it means that an amount of reliable and cheap electricity equal to the demand of all government buildings is sourced, produced, and sold — in Britain, for Britain, and by Britons.

Allowing 5% of demand per county to be met with clean coal power stations ensures that the country can stay on track to meet its international CO2 commitments and avoid the negative healthcare costs associated with behemoth scale coal power stations located near major population centres.

These are simple ways to attract new business to Britain, to increase revenue for a government still on the mend from the global recession, to create jobs and increase profits for the construction, manufacturing, and coal mining and coal-fired generation segments of the economy, and to add much-needed stability to the UK energy grid.

Instead of waiting to do it all after Brexit — and who knows what might happen to the global economy in the meantime — it’s better to take Britain out of its economic shackles, now, proactively, and with vigour.

The Chancellor of the Exchequer, Philip Hammond, has made some deft moves in recent days. Let’s hope this is the beginning and not the end of this trend.

Related Links: